ICBC : Industrial and Commercial Bank of China (1398)

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Firstly state owned banks take direction from the state, especially in a communist state, in case we forgot. Whether mgt is intelligent or not only reduces the risk, it doesn't do away. There are valid reasons why people thought these products are guaranteed by the states or the banks.

Secondly 20% of profit is not minor when you have 10X PE. How much market cap do you think that is? Neither is foray into international markets a given plus. It depends on mgt execution or are they just following the corporates' money trail. Those old enough will remember the mega Japanese banks of the 90s.

3rdly as per posted all these shadow banking products pose a systemic risk to the system with estimates around US$4tr. The question is how the govt arrest the issue and spread out the PERCEIVED credit risk. Based on the govt's past track record, I think they will be able to manage it well but a short pain is expected if they really let the 4 entities take 25% of the loss.

1st, Yes I agree to that.

2nd, Excuse me. The PER is 5.5x, not 10x. So there's reasonable margin of safety in case of any shock.

3rd,Correct there's risk. However, most of the highly profitable companies are state owned. NO MATTER how the money flows, government at some point will absorb it back to their reserve. If you observe the value chain, from mining, manufacturing, retail, financing, etc, the government has some strong SOE running them. Most of the money will eventually flow back to government.

In case of crisis, the government will just pump back the money by absorbing through their "Asset management company". Why should government do that? To prevent a full-blown crisis, so they can earn MORE money in long run. Make some sense bro?